Sanctions tighten grip on Russia's economy, warn allies like China

The US Departments of Finance and Diplomacy announced on Wednesday a broad package of additional sanctions aimed at striking Russia's "war economy" and cutting it off from critical materials and services supplies, including from China. Russians will also be cut off from American IT services.

As announced in a statement by the US Department of the Treasury, the actions taken on the eve of the G7 summit in Italy are intended to significantly increase the risk of secondary sanctions for entities doing business with Russian banks, the arms industry, and other key sectors of the economy. This also applies to China, which plays a significant role in circumventing current restrictions.

Among the long list of actions taken is the expansion of sanctions to the largest Russian state-owned banks, including Sberbank, Vnesheconombank, and VTB, concerning all their significant transactions, including with branches of these banks in China and India. Additionally, 300 entities and individuals supporting the Russian defence industry have been sanctioned.

Many Chinese companies supply dual-use goods — sending parts needed for drone production, counter-drone systems, or industrial machinery for weapons manufacturing — and companies' networks allowing Russia to circumvent existing restrictions. Besides China, this includes entities from Russia, Belarus, the British Virgin Islands, Bulgaria, Kazakhstan, Kyrgyzstan, Serbia, South Africa, Turkey, and the United Arab Emirates.

As US National Security Advisor Jake Sullivan said on Wednesday, the sanctions are a signal to Beijing and other countries supporting Russia's war machine that "at serious risk of running afoul of the Treasury Department and falling under a sanctions regime."

The US also decided to introduce a ban on providing certain IT services, including cloud services, to almost all Russian individuals and companies. These changes will take effect on September 12 and target the Russian industry that relies on these services.

Additional sanctions were aimed at nearly 100 Russian companies participating in the "war economy," including in the energy, metallurgy, and mining sectors, as well as companies involved in money laundering, such as through gold trading. The restrictions are also intended to hit Russian projects for the extraction and transport of liquefied natural gas (LNG).

The Department of Commerce also announced measures to further impede the re-export of sensitive goods to Russia by entities in third countries.

Personal sanctions were also announced, including on individuals and entities involved in the systematic deportation of Ukrainian children to Russia, individuals close to Belarusian leader Alexander Lukashenko, and Evghenia Gutul, the pro-Russian leader of Gagauzia, an autonomous region in Moldova. Gutul is a politician associated with sanctioned and accused of massive financial embezzlement oligarch Ilan Sor. The authorities in Moldova consider her and Sor as figures used to destabilize the country.

Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries. We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services. Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine, concluded Treasury Secretary Janet Yellen.